Although the fate of Obamacare in the Supreme Court is still an open question, the prognosis is decidedly negative for the congressional effort to repeal the McCarran-Ferguson antitrust exemption for health insurers.

Although the Republican-controlled U.S. House of Representatives has passed a bill that would repeal the antitrust exemption for health insurers, the bill is not likely to pass the Democratic-controlled Senate.

The repeal of the antitrust exemption enjoyed by health insurers was included in the Protecting Access to Healthcare Act (the “PATH Act”), which was drafted by opponents of President Obama’s healthcare overhaul to repeal parts of that law.  The PATH Act recently passed the House (H.R. 5), largely along party lines.

As originally drafted, the amendment repealing the antitrust exemption would have applied broadly across the insurance industry.  However, the amendment was revised to keep the antitrust exemption for life insurance, annuities, property and casualty insurance, and other types of insurance other than health insurance.

Representative Paul Gosar (R-Arizona) sponsored the repeal amendment, stating that the measure was necessary “so that we can empower health insurance companies to compete more aggressively.”  On the other hand, Gosar also emphasized that the amendment would preclude class action lawsuits against health insurers, leaving antitrust enforcement to government authorities.

Representative John Conyers (D-Michigan) expressed the view of many Democrats by noting that the class action bar “effectively destroyed” the repeal.  Implicit in his statement was the acknowledgment that private actions play a major role in enforcement of the antitrust laws.

In the end, though, none of this is likely to amount to much more than political posturing in an election year.  The PATH Act is not likely to be passed by the Senate.  Not only are Senate Democrats unlikely to support the PATH Act, but President Obama has threatened to veto the bill if it makes it to his desk.

The enormous costs of expert fees in antitrust cases is proving to be both a silver lining for plaintiffs bound by class action waivers and a focal point for calls to reform the fee shifting provisions of U.S. antitrust law.

As discussed in a recent article by Constantine Cannon attorneys, the high cost of antitrust experts has led the United Sates Court of Appeals for the Second Circuit to hold a class action waiver unenforceable in the In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012) (“In re Amex”).

Mandatory arbitration provisions and class waivers have received much judicial attention, particularly when the clauses appear in consumer contracts.  The Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011) – which held that the Federal Arbitration Act preempted a California state rule finding many such clauses unenforceable on unconscionability grounds – was seen by many as support for the validity and enforceability of these clauses in consumer contracts. 

Despite the holding in Concepcion, the Second Circuit has now reaffirmed its prior decision that the class waivers found in merchant agreements found in In re Amex are unenforceable. 

The Second Circuit relied heavily on an affidavit from Dr. Gary French, an economic expert, and found that the plaintiffs had established that proceeding with their claims on an individual basis was economically infeasible.  Dr. French’s analysis showed that the high cost of the economic expert analysis necessary to successfully prosecute the case would dwarf the potential treble damages for each plaintiff and would thereby make such a strategy cost-prohibitive.

Based on this economic analysis, the Second Circuit found that private plaintiffs would effectively be deprived of the ability to vindicate their causes of action under the federal antitrust laws – making the class action waiver unenforceable. 

The Second Circuit’s decision raises another issue: a potential need to reform the fee shifting provision of the Clayton Act, 15 U.S.C. § 15(a).  The recent article by Constantine Cannon attorneys analyzes In re Amex, and considers whether the Clayton Act should be amended to shift the cost of expert fees by making such costs recoverable by successful antitrust plaintiffs.